Tax Alert: Another Major Tax Increase Dies, But More Likely on The Way!
We had another victory last week on the issue of taxes. SB 1286, introduced by Senator Creigh Deeds (D-25, Bath County), would have raised the top rate on Virginia Families whose taxable annual income is $150,000 or more from 5.75 percent to 5.9 percent. The increased revenue would be pledged for school construction and salaries for law enforcement officers, priorities that can and should be made with the rising revenue the commonwealth already is realizing.
The bill went down on a unanimous vote in the Democrat dominated Senate Finance and Appropriations Committee, which proves that even some on the Left recognize that taxing families on income not considered to be exorbitant during a pandemic isn't exactly a good idea. In two weeks time two major tax increases have been tabled. As we noted last week, the Death Tax also met its demise on a unanimous vote in the Democrat controlled House Finance Committee. The Senate committee did, however, agree to study Senator Deeds' proposal, as well as many others, in a special tax review subcommittee it is forming to study reforms and changes to Virginia's tax code throughout 2021.
Unfortunately, the tax increase advocates haven't let up, especially in the House. The annual conformity bill, which simply matches-up Virginia tax provisions to changes made to the federal code, is being hijacked this year over Payroll Protection Program funds. Governor Ralph Northam originally proposed NO exemption for those who received the loans to pay their employees or other expenses to keep their businesses afloat during the COVID pandemic.
Democrat delegates met that with great discomfort, as they dare not face their constituents in an election year after raising their taxes for employing people who also happen to be their constituents. They instead came up with a partial exemption -- a paltry $25,000 cap for unincorporated employers, which passed the floor on a party line vote. The Senate unanimously passed a much better, but still not desirable, $100,000 exemption, as the average PPP loan-turned-grant in Virginia topped that figure. Neither bill addresses the following tax year, opening the door for a punt after the election and a massively punitive tax increase. By contrast, in Washington, both parties agreed to exempt from federal taxation 100 percent of ALL PPP funds received. If it's good enough for Nancy Pelosi and Chuck Schumer then it should be good enough for the Democrats in the Virginia legislature!
The differences will be worked out over the next few weeks into the newly called special session. We will continue to monitor these bills and update you on what could amount to a horribly unexpected and uncalled for burden on struggling family businesses.
In the meantime, if this massive and unfair backdoor tax increase concerns you, we strongly urge you to join the virtual town hall and leave your thoughts for House Finance Committee members on the newly established comment page for SB 1146.
